Last year, we started covering the conflict facing technology companies in simultaneously meeting climate targets and business goals. Bloomberg wrote about the increasing pressure yesterday:
“Microsoft said its carbon emissions are now 30% higher compared to 2020 as it invests in AI infrastructure. Google recently said its carbon emissions went up by 48% in the past five years due to energy consumption at its data centers and emissions from its supply chain. Amazon said it actually reduced carbon emissions last year by 3% but still expects to face some challenges from AI.”
As a result, Google is implementing the Google Renewable Energy Addendum, asking its “largest hardware manufacturing suppliers to commit to achieving a 100% renewable energy by 2029”. We couldn’t find much about this program – it may be an addendum to Google’s supplier contracts and perhaps not publicly available. ESGtoday wrote that Amazon announced “an expectation for the company’s key suppliers to provide decarbonization plans.” Similarly, LEGO announced that because “over 99 percent of the LEGO Group’s total carbon emissions come from outside its own operations, largely from suppliers”, the company is launching a new Supplier Sustainability Program requiring “that its suppliers take significant steps to reduce their own emissions.”
Issuing statements and policies for supplier conformance to sustainability goals isn’t new, but historically many companies allowed a fair amount of flexibility in how, when or if suppliers would be accountable for meeting those targets. Supplier sustainability mandates have been largely rhetorical, but that may be changing – especially for companies developing energy-intensive AI and others seeing the reality of emissions trends versus their targets. More suppliers than ever may now have face the music.
New pressure and demand for decarbonization creates risks for those seeking answers. The voluntary carbon market isn’t the only potential solution fraught with reputational risk, fraud and other business risks. Other technologies include removals of many flavors, carbon capture and storage (CCS), projects involving agriculture, ocean CO2 absorption, biochar, etc, etc. Unfortunately, even those that defy common sense can be lauded with fanfare and initial investment. Recent high-profile failures (such as Running Tide) and ongoing problems in the offsets market, combined with new pressure from big companies on their suppliers, highlight the importance of conducting detailed due diligence on developing solutions.
Maintain skepticism, push back against irrational exuberance and excitement and make sure proven commercial-scale technology justifies the hype. If something doesn’t make sense, don’t assume everyone in the room is smarter than you – go ahead and ask about the emperor’s new clothes. You could end up saving the company money, reputation and customer relationships by spotting problems early.
Our members can find more information about identifying a range of climate-related risks here and in the checklist here.
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